ICANN Should Investigate NAF’s UDRP Practices

On February 23rd the ICA sent a letter to ICANN requesting that it initiate an immediate investigation of the UDRP arbitration practices of the Minneapolis, Minnesota-based National Arbitration Forum (NAF). NAF is the number two provider of UDRP arbitration services, led only by the World Intellectual Property Organization (WIPO) – in 2010, WIPO handled 2,696 UDRP filings while NAF’s total was 2,177.

NAF has been regarded warily by domain registrants for some time. It entered into a consent decree with the Minnesota Attorney General in 2009 – after being sued by that law enforcement agency for “consumer fraud, deceptive trade practices, and false advertising” – in which it agreed to exit the consumer credit and collections arbitration field. Yet so far as we know that well-publicized embarrassment provoked no inquiry from ICANN as to whether NAF should remain an accredited UDRP provider. Statistical studies have also indicated that NAF relies on a very small pool of “neutrals” to perform the majority of its UDRP cases, and that these favored few find for complainants substantially more than average.

Our request for the investigation was prompted by two recent cases that fell far below even NAF’s usual standards, and that belie any perception of even-handed treatment of registrant rights. In the first case a “rights holder” was awarded a generic domain whose name was identical to the rights it had disclaimed in order to get its US trademark approved. In short, it had no relevant rights, and in our view the case should have been summarily dismissed for bad faith attempted reverse domain name hijacking.

In the second case, an initial three paragraph complaint was unilaterally amended at the 11th hour, in violation of relevant ICANN UDRP Policy, by a 191-page supplemental filing. The decision for complainant handed down just four working days later — before the registrant had any meaningful opportunity to respond to what amounted to an entirely new filing.

These two decisions have already caused one Internet law expert to opine: “Charades of adjudication such as the ones described here make us seem to our clients to be part of some racket, almost like the old Soviet “lawyers” who were paid to help put you in jail.” http://www.likelihoodofconfusion.com/the-domain-game/

Practices like this, if tolerated by ICANN, undermine whatever faith remains in the UDRP as an even-handed process. ICANN has accredited entities like NAF to be UDRP arbitration providers, which empowers them to extinguish or transfer the valuable intangible rights represented by a domain name. The fact that the GNSO (ICANN’s internal policymaking body) has unwisely chosen to defer the initiation of a UDRP reform inquiry until mid-2014 at the earliest does not mean that ICANN can absolve itself of the responsibility to exercise some oversight over the UDRP arbitrators it has accredited. Domain registrants should not be expected to tolerate these types of shoddy practices until 2016 or later, which is the soonest that any UDRP procedural reforms emerging from a policy development process could be expected to take effect.

ICANN also needs to realize that a fairly administered UDRP regime is not only crucial to current registrants in the existing gTLDs but to the future registrants who will decide whether its new gTLD program is a success or failure. In addition to the UDRP, registrants in new gTLDs will also be subject to the thoroughly untested Uniform Rapid Suspension (URS) proceeding. If this is the type of “justice” that registrants can expect to be meted out in return for NAF’s $1300 UDRP filing fee (1-2 domains, single member panelist), what can they expect under the URS, which ICANN has promised trademark interests will cost a mere $300 for filings against one or multiple domains held by the same registrant? (To their credit, both NAF and WIPO have indicated that no credible process can be provided at that bargain basement rate, which may explain why ICANN is months late in initiating a URS implementation process).

Some may view our request as too much ado over domains that have annual registration costs of less than $10. But that entirely misses the point. Aside from the fact that the secondary marketplace puts a high value on non-infringing generic domains, making them valuable intangible assets every bit as worthy of respect as trademarks, there are bigger issues at stake. The recent PIPA/SOPA Internet blackout arose out of concern over domain censorship as a result of ISP and search engine blocking. If those are major concerns for Netizens, then what about domain “theft” carried out under color of a purportedly balanced process? That’s the ultimate in censorship.

While there are more than twice as many Facebook users as registered domains, domains nonetheless remain the only true guarantee of Internet freedom. Users of Facebook, Google+, Apple Apps, Twitter, and all other manner of social networking intermediaries and software do not own their identities on those platforms and are subject to corporate policies that can change on a whim. But a non-infringing domain operated in conformity with applicable law can be one’s perpetual Internet identity, printing press, and business– so long as it receives protection against overreaching trademark interests abetted by a system that makes a mockery of registrant due process rights. In no way do we condone cybersquatting – but we do take issue with attempts to hijack domains in which the complainant has no legitimate rights; as well as expansive views of what constitutes a “confusingly similar” domain that, carried to logical conclusion, would make most of the DNS subject to trademark holder takeover.

ICANN needs to look into this matter and do the right thing on behalf of all domain registrants. In that process, it should invite input from registrants and counsel who believe they have been mistreated by NAF, and it should make the results of its findings public. After all, it is an organization that professes its commitment to transparency and accountability.

We have also suggested that, if ICANN finds NAF to have been operating in an unacceptable manner, it should be subject to a ‘consent decree’ that requires it to mend its ways as a condition of continued accreditation to administer UDRP cases. In short, let’s have a UDRP regime that is even-handed in both perception and reality.

Re; Request for Initiation of Immediate Investigation into UDRP Practices of the National Arbitration Forum (NAF)

Dear Chairman Crocker and President Beckstrom:

On behalf of the members of the Internet Commerce Association (ICA) I am requesting that ICANN staff immediately initiate an investigation of the practices of the National Arbitration Forum (NAF) in its administration of ICANN’s Uniform Dispute Resolution Policy (UDRP). Two recent NAF decisions have further heightened already prevalent concerns among domain investors and developers in regard to NAF’s lack of adequate quality control in its handling of UDRP cases, as well as the perception that it is willing to sacrifice the substantive and procedural rights of domain registrants to encourage forum shopping by complainants.

ICANN has chosen not to enter into binding contracts with accredited UDRP providers, which in our view is an unwise choice that results in a lack of clear delineation of their powers and responsibilities, and deprives ICANN of flexible enforcement powers to assure that UDRP administration is indeed “Uniform” within and among accredited providers. We nonetheless believe that ICANN has a fundamental responsibility to exercise oversight over those entities it has empowered to extinguish or transfer domains. A failure to make adequate inquiry into NAF practices would be an abdication of that responsibility and would communicate the message that ICANN is not protective of the valuable intangible rights of domain name registrants. That impression has already gained traction in the wake of the GNSO’s December 2011 decision to defer the initiation of any inquiry into UDRP reform until mid-2014 at the earliest, notwithstanding the substantial input received from multiple ICANN constituencies that UDRP review was overdue, particularly in regard to procedural matters.

Preexisting Concerns About NAF

Along with WIPO, NAF is one of the two principal UDRP forums. Our understanding is that WIPO, while far from perfect and notwithstanding its strong ties to intellectual property (IP) interests, is perceived by registrants and their counsel as doing a far better job in producing predictable and consistent UDRP decisions of a generally good quality in conformance with ICANN Policy, while maintaining an even-handed approach in such procedural matters as the selection of examiners.

NAF, to the contrary, is regarded warily. As you should be well aware, NAF was sued in July 2009 by the Office of the Attorney General of Minnesota, which alleged that “[t]hrough its conduct, the National Arbitration Forum has violated Minnesota’s statutory prohibitions against consumer fraud, deceptive trade practices, and false advertising” http://www.ag.state.mn.us/PDF/PressReleases/SignedFiledComplaintArbitrationCompany.pdf . Just days after that lawsuit was filed, NAF entered into a consent decree with the State of Minnesota in which it agreed to withdraw from arbitration activities for all consumer credit and collection disputes; prior to that withdrawal NAF had conducted more than 200,000 such arbitrations per year http://pubcit.typepad.com/files/nafconsentdecree.pdf .

So far as we are aware, ICANN took no action to inquire into NAF’s administration of UDRP cases notwithstanding the wide publicity that its consumer arbitration withdrawal received. Within weeks after entering into the consent decree NAF issued a press release noting that it would continue to act as a UDRP arbitrator http://www.adrforum.com/newsroom.aspx?&itemID=1534&news=3 .

A 2010 study documented that, while NAF listed a total of 141 UDRP panelists, a mere ten of them (7 percent) were assigned two-thirds (66.3 percent) of all UDRP arbitrations, raising questions regarding whether examiner selections were random or skewed http://www.dnattorney.com/study.shtml . The top five panelists who transferred the largest percentage of domains (found in favor of the complainant) were all among those ten most favored examiners, raising a perception that NAF may skew toward appointing examiners who favor complainants inordinately. The NAF examiner assigned the most cases – ten percent of all cases arbitrated during the review period – was sued in 2009 for judicial misconduct http://domainnamewire.com/2009/07/22/national-arbitration-forum-panelist-sued-for-judicial-misconduct/ . It is our information that NAF routinely employs examiners who also act as counsel for complainants, but has rejected well-qualified counsel who tend to represent respondents.

To the contrary, WIPO appears to have done a credible job in evenhanded panelist appointments. A similar study of WIPO panelist assignments found these results:

Analyzing WIPO UDRP data from 1999 until early 2010, it turns out that the five WIPO panelists who have heard the most cases are in the bottom quartile when it comes to finding in favor of the complainant and transferring or canceling a domain. 8 of the top 10 busiest panelists are in the bottom quartile. In other words, there’s little possibilit
y that cases are being handed to arbitrators because they’re more likely to rubber stamp them for the complainant.http://domainnamewire.com/2010/04/26/wipo-panelist-study-sheds-more-light-on-udrp-practices/

It has also been reported that NAF provides its examiners with a law clerk-penned memo for each case to be decided. This additional document appears to violate UDRP Policy that an examiner should decide cases based entirely upon the submissions of the complainant and respondent, and is a practice that facilitates the issuance of hasty “cut and paste” decisions http://domainnamewire.com/2009/11/30/national-arbitration-forum-provides-shortcut-to-udrp-arbitrators/ . There is no transparency as to the number and identity of these clerks, but they are likely employees of NAF, not third party neutrals, and have a substantial influence on the outcome of arbitrations.

While many of the UDRP cases submitted to NAF appear to have been decided in a fair and well-thought manner, all of the above practices already indicated a lack of quality control and a perception of pro-complainant bias even prior to the issuance of the two badly flawed decisions that sparked this letter.

The Decisions

Attached to this letter are two memos prepared by the esteemed attorney Paul Keating of Barcelona, Spain. We will not repeat his detailed rendition of the relevant facts but focus on the most salient points. We would also add that the registrants of the domains at issue are not members of the ICA and are in no way known to us other than through these case histories and review of the NAF arbitration decisions.

In the case of Hardware Resources, Inc. v. Yaseen Rehman, the complainant alleged that the domain hardwareresources.org was identical to and confusingly similar to its trademark for “HR Hardware Resources”. But the UDRP only provides protection for rights holders; it cannot create nonexistent rights or expand those that were lawfully granted. Had the examiner taken a minute to check on the complainant’s trademark filing with the U.S. Patent and Trademark Office (USPTO) he would have noticed that each of the relevant trademarks was accompanied by the following statement:

“NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE “HARDWARE RESOURCES” APART FROM THE MARK AS SHOWN.”

In other words, the complainant had already conceded that it had no rights to the generic term “hardware resources” in order to obtain its U.S. trademarks. As Mr. Keating notes, “Trademark disclaimers are there for a reason; without the disclaimer the USPTO would not have issued the registration. It defies logic to permit a registration with a disclaimer and then support a trademark in only what has been disclaimed.”

In our view the complaint should have been dismissed at that point accompanied by a finding of reverse domain name hijacking for bad faith filing. On this issue, the WIPO Overview of WIPO Panel Views on Selected UDRP Questions, Second Edition (“WIPO Overview 2.0”; http://www.wipo.int/amc/en/domains/search/overview2.0/#46) states:

4.17 In what circumstances should a finding of Reverse Domain Name Hijacking or abuse of process be made?

Paragraph 15(e) of the UDRP Rules provides that, if “after considering the submissions the panel finds that the complaint was brought in bad faith, for example in an attempt at Reverse Domain Name Hijacking or was brought primarily to harass the domain-name holder, the panel shall declare in its decision that the complaint was brought in bad faith and constitutes an abuse of the administrative proceeding”. Reverse Domain Name Hijacking is defined under the UDRP Rules as “using the UDRP in bad faith to attempt to deprive a registered domain-name holder of a domain name”…To establish Reverse Domain Name Hijacking, a respondent would typically need to show knowledge on the part of the complainant of the complainant’s lack of relevant trademark rights, or of the respondent’s rights or legitimate interests in, or lack of bad faith concerning, the disputed domain name…The fact of default by a respondent does not necessarily prevent a finding of Reverse Domain Name Hijacking in appropriate cases, and WIPO panels have on occasion entered such findings on their own initiative, especially where the complainant has intentionally attempted to mislead the panel by omitting material evidence.(Emphasis added)

The fact that the Pakistani-domiciled respondent offered the domain to the complainant for $40 is hardly evidence of bad faith cybersquatting; rather, it is testimony to the apparent lack of sophistication of a registrant unaware that such a non-infringing generic domain could probably fetch at least $four figures in the secondary domain marketplace. Likewise, the fact that the respondent failed to participate in the UDRP is most likely due to a lack of knowledge regarding his rights or an inability to afford counsel. Again, relying upon the WIPO Overview, a default judgment need not favor the complainant in these circumstances:

4.6 Does failure of a respondent to respond to the complaint (respondent default) automatically result in the complainant being granted the requested remedy?

Consensus view: A respondent’s default does not automatically result in a decision in favor of the complainant…the complainant must establish each of the three elements required by paragraph 4(a) of the UDRP. Although a panel may draw appropriate inferences from a respondent’s default (e.g., to regard factual allegations which are not inherently implausible as being true), paragraph 4 of the UDRP requires the complainant to support its assertions with actual evidence in order to succeed in a UDRP proceeding. There are many examples of cases (typically involving complaints based on wholly unsupported assertions or mere conclusory statements) to which there has been no response where (not withstanding such respondent default) the decision has nonetheless gone in favor of the respondent on grounds that the complainant has failed to prove its case. (Emphasis added)

Finally, the fact that this generic domain resolved to a page featuring links to providers of hardware products and services is in no way evidence of bad faith. Again, with reference to the WIPO Overview:

2.6 Do parking and landing pages or pay-per-click links generate rights or legitimate interests in the disputed domain name?

Panels have generally recognized that use of a domain name to post parking and landing pages or PPC links may be permissible in some circumstances, but would not of itself confer rights or legitimate interests arising from a “bona fide offering of goods or services” [see also paragraph 3.8 below] or from “legitimate noncommercial or fair use” of the domain name, especially where resulting in a connection to goods or services competitive with those of the rights holder. As an example of such permissible use, where domain names consisting of dictionary or common words or phrases support posted PPC links genuinely related to the generic meaning of the domain name at issue, this may be permissible and indeed consistent with recognized sources of rights or legitimate interests under the UDRP, provided there is no capitalization on trademark value (a result that PPC page operators can achieve by suppressing PPC advertising related to the trademark value of the word or phrase). By contrast, where such links are based on trademark value, UDRP panels have tended to consider such practices generally as unfair use resulting in misleading diversion. (Emphasis added)

The second case is thatof Auto-Owners Insurance Company v. Nokta Internet Technologies. The problem in this case was gross procedural unfairness under NAF Supplemental Rules that are in conflict with ICANN’s own UDRP Policy.

The original complaint was but three paragraphs in length and did not allege any bad faith registration on the part of respondent (a required element to find for complainant) but asserted simply that the respondent lacked legitimate interest in this generic domain because it contained PPC links to, not surprisingly, insurance products. Mr., Keating served as counsel to respondent and prepared a response explaining that the complainant’s asserted rights were in a non-distinctive design mark.

At the 11th hour the panel then accepted a 191-page supplemental filing (13 pages of argument and 178 pages of exhibits) from the complainant, which the panel had not itself requested. Mr. Keating was in the process of preparing a response to this outsized supplemental filing when, a mere four working days after its receipt, the panel issued a 13-page decision in favor of complainant!

The supplement was filed under NAF Supplemental Rule 7, which NAF panels have held to be controlled by ICANN Policy Paragraph 12, and which reads:

12. Further Statements

In addition to the complaint and the response, the Panel may request, in its sole discretion, further statements or documents from either of the Parties. (Emphasis added)

Complainant’s 191-page supplemental filing not only had not been requested by the panel, it essentially constituted an entirely new complaint to which respondent was not afforded adequate time to respond. This entire process was fundamentally unfair on its face.

As Mr. Keating concludes:

ICANN must resolve this issue. NAF’s SR7 is in inherent conflict with the UDRP which is the only binding obligation of the respondent. The ADR provider may not adopt rules that are in conflict with the UDRP and the panels may not enforce supplemental rules to the extent they are in conflict with the UDRP and the basic concept of fairness that is supposed to prevail under the Policy. By failing to address such abuse, ICANN is exposing the entire contractual arbitration process to distain and legal challenge. While not perfect, stability and inherent fairness is fundamental to the proper functioning of the UDRP. The panel (and NAF) in this case ignored both.

Conclusion

The two cases cited above are reportedly just the tip of the iceberg of NAF’s questionable arbitration of UDRP cases. ICANN has accredited NAF to act as a UDRP arbitrator, and if ICANN does nothing in response after being made aware of such conduct it will in effect be sanctioning practices that are at odds with fundamental notions of fairness and reasonable due process in UDRP adjudication.

We urge ICANN to fully investigate NAF’s administration of UDRP cases and, if it finds that the NAF has engaged in practices that are biased against respondents, that are at odds with ICANN policy and procedures, and that fail fundamental standards of fairness and professional conduct, to condition NAF’s further accreditation as a UDRP provider upon its entry into a “consent decree” with ICANN – with violation of such agreement to result in withdrawal of accreditation. At a minimum, that decree should address such matters as:

· Practices designed to assure that selection of panel experts are random and unbiased.

· Limiting the basis of examiner decisions solely to the submissions of the two parties.

· NAF’s explicit recognition that a non-infringing generic domain’s links to products and services related to that domain name is consistent with recognized sources of rights or legitimate interests under the UDRP.

· Permanent dismissal of examiners who evidence an inability to inquire into such basic evidentiary elements as the legal basis for claim of trademark rights.

· Limitation of Supplemental Rules solely to administrative matters, and permanent deletion of all such Rules that are in conflict with ICANN Policy.

These are but a start, and ICA would be pleased to put ICANN staff in touch with expert counsel who have represented respondents before NAF Panels and may well have additional suggestions for reform.

In addition, given the fact that the decisions in the two cases cited above are insupportable on, respectively, substantive and procedural grounds, we hereby ask ICANN to immediately instruct the relevant registries and registrars that no transfer of the domains in question to the complainants should be undertaken until this matter has been fully investigated and resolved. If ICANN finds that these decisions lacked adequate basis or were fundamentally unfair it should seek to have the prior decisions vitiated and the cases reheard.

Conclusion

IP interests repeatedly assert that any digital infringement of their rights constitutes “theft”. But do
mains, like trademarks, constitute valuable intangible assets, and when a domain is transferred through a UDRP process that is procedurally and substantively flawed that is an even greater theft, because digital files can be infinitely and perfectly copied while only a single entity may control a domain.

As ICANN undertakes a substantial expansion of the DNS through its new gTLD program, it is essential that the rights protection measures it employs are balanced in both substance and practice. NAF’s administration of the UDRP in the cases cited above appears to be seriously flawed and creates the appearance of substantial bias and ineptitude. ICANN has a responsibility to make serious inquiry into this matter and to take remedial action based upon its findings.

Thank you for considering our request in this matter.

Sincerely,

Philip S. Corwin

Counsel, Internet Commerce Association

ICA Background

ICA is a not-for-profit trade association representing the domain name industry, including domain registrants, domain marketplaces, and direct search providers. Its membership is composed of domain name registrants who invest in domain names (DNs) and develop the associated websites, as well as the companies that serve them. Professional domain name registrants are a major source of the fees that support registrars, registries, and ICANN itself. ICA members own and operate approximately ten percent of all existing Internet domains on behalf of their own domain portfolios as well as those of thousands of customers.